Financial market

Fall in Brazil Risk, dollar quotation against the real and stock market on the rise suggest scenario change for the better. Reforms influence progress

After a series of measures and reforms proposed by the government, important indicators for the economy have assumed a positive trajectory. There is a fall in Brazil risk, the stock market is on the rise, the dollar quotation is against the real, they all suggest a better country that is ever closer to resuming sustainable growth.

These indicators also show that Brazil has become more reliable and stable for investors and consumers. The reforms that the government put in place were decisive for this change of scenery, mainly for reorganizing the public accounts, which were identified as fuel for the crisis.

With the measure that creates a limit for the expansion of public expenditures, the Social Security reform proposal and microeconomic measures that debure the country and encourage entrepreneurship, the picture has become more favorable for investments in Brazil.

Risk Brazil

This better scenario can already be observed in indicators that resemble thermometers for a country's economy. Risco Brasil, measured by Credit Default Swap (CDS) contracts, has fallen more than 50% in the last 12 months.

The CDS is an agreement between two parties: on the one hand, a financial institution buys protection for its credit portfolio; On the other, an insurer or other institution sells such protection.

If a financial institution has a CDS, it has a kind of insurance. Assuming someone bought a CDS from the United States, for example, that means he has insurance in case the United States does not honor his debt to that person or financial institution.

CDS is measured in basis points. If a country has a CDS of 100 points, it means that the lender will have to pay the equivalent of 1% of their credit portfolio to acquire this insurance. For Brazil, with the fall of the CDS, it means that the risk of the Country giving a default has fallen and, therefore, it became cheaper to buy insurance for the Brazilian debt.

Dollar and Stock Exchange

Besides Brazil Risk, other important indicators are the stock exchange and the dollar price. In the last 12 months, the main thermometer of the São Paulo Stock Exchange (BM & FBovespa) has risen more than 60%.

The Brazilian currency also strengthened in the period against the dollar. The price of the US currency fell from R $ 3.93 in February last year to R $ 3.10, a decrease of 21% in the period.